First-time buyer mortgage boost: you can now borrow up to 6 times your salary

First-time buyers can now borrow six times their annual earnings when applying for a mortgage, but many still struggle significant barriers to entering the wealth ladder.

A major lender has relaxed criteria for people buying a home with a 5% deposit, providing a much-needed boost to cash-strapped first-time buyers.

Here we explain how the deal works and delve into the details of a new report on the main issues facing potential buyers.

First-time buyers can borrow 6 times their salary

Across the country, first-time buyers with a 5% deposit can now borrow up to six times their annual income.

The new limit, which is the highest available from any major lender, forms part of Nationwide’s Helping Hand mortgage offer for first-time buyers, which was launched in 2021.

This means a couple buying their first home with a combined income of £50,000 could potentially borrow up to £300,000.

Most lenders limit lending to four and a half times your income, which would mean a couple earning £50,000 could only borrow £225,000.

The Helping Hand Nationwide deal previously allowed people to borrow up to five-and-a-half times their income, a figure comparable by lenders including Lloyds Bank and Halifax.

A national mortgage loan has a minimum income requirement of £50,000 (joint applicants) or £30,000 (single applicants). It is not available to self-employed people.

Find out more: : how to save on a mortgage deposit

Mortgage rates remain high for first-time buyers

The mortgage market has started to improve for first-time home buyers, but interest rates remain a barrier for many people trying to buy a home.

In addition to being able to borrow more money, first-time buyers will welcome the recent increase in loan values number of low deposit mortgage loans on the market.

Due to the decision of the Bank of England to reduce the interest rate basic rate to 5% in August, most mortgage providers lower mortgage interest ratesbut 90% and 95% mortgage rates remain high.

Currently the cheapest two-year fix at 90% loan value is priced at 5.04% or 5.35% for a 95% mortgage.

Find out more: best mortgage rates

Challenges facing first-time buyers

According to the latest report by the Building Societies Association (BSA), the current conditions for purchasing a first home are among the toughest in 70 years.

New research from Moneybox has found that 59% of first-time buyers feel they have started saving too late for their first home.

One in 10 self-buyers said it would take 10 years to save for a deposit, and a third admitted the home buying process was much more difficult than they expected.

Millennials in particular are putting off other life events until they buy their first home. The report shows that 30% of women and 24% of men decide to delay having a child or more children until they become home owners.

For many Bank of Mom and Dad remains a key factor with 71% of buyers relying on it when purchasing their first home.

EXPERT OPINION

Home supply remains a problem

High house prices and mortgage rates have created a difficult environment for first-time buyers, but David Hollingworth of broker L&C Mortgages says the lack of available homes is also a major problem.

He says: “House prices may have had their ups and downs over the last few years, but they remain high despite higher interest rates.

“I believe that for the right customer, greater lender flexibility and innovation should mean that more ambitious buyers will be able to find a solution more quickly and become a homeowner.

“The long-term solution will be to improve the supply of new and affordable homes, which will not happen overnight.”

How much do you need to save for a mortgage loan?

Moneybox found that the average savings target for people looking to buy their own home was £46,000.

Very first time buyer A deposit of at least 5% of the property value is required. How much this equates to depends on where you buy.

When we he twisted the numbers earlier this year we found that 5% of deposits ranged from as little as £4,700 (in Burnley, Lancashire) to over £30,000 (in many parts of London).

If you are able to save more, you can usually get lower rates with a 10% deposit.

The more properties you own, the lower your chances are negative capital too. This happens when the value of the property falls below the amount owed on the mortgage.

Finding the right mortgage loan offer

The right type mortgage will depend on your finances, the deposit you have saved and the type of property you want to buy.

There are thousands of mortgages available on the market, so you’ll need to think about things like contract length, upfront fees and early repayment fees if you’re moving.

A mortgage broker can offer advice in all of these areas and more. A good broker will find you the right deal for your circumstances and guide you through the application process.

You can choose a mortgage without advice, but always remember to shop around – your current banking provider is unlikely to offer the best deal.

Find out more: how to choose a mortgage broker

How to buy your first home

Buying a home and applying for a mortgage can seem overwhelming, so it’s best to look at the process step by step.

Our guide to purchase A house explains the entire process, from making a deposit to exchanging contracts and closing.

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